Job Growth and Productivity

By
APICS CEO Abe Eshkenazi, CSCP, CPA, CAE -
February 10, 2012

January was a great month for jobs here in the United States. In fact, the US Department of Labor reveals that 243,000 jobs were added to the economy and the unemployment rate dropped to 8.3 percent. It was the biggest jobs gain in nine months, surpassing most analysts' forecasts. The manufacturing sector also has been showing significant improvement: It added 50,000 jobs in January and another 32,000 in December.

A recent Bloomberg News article examines the unambiguously positive figures, particularly those surrounding manufacturing. The author, Timothy R. Homan, notes that the gains in factories may continue, as manufacturing workweeks are the longest in 14 years, and overtime is at its highest level since March 2007. Additionally, "Inventory rebuilding at the end of 2011 is driving orders at the same time companies replace equipment and demand for automobiles rises," he writes. Overall production also is up.

However, it is somewhat ironic that an increase of jobs can lead to a decrease in productivity, even as overall production rises. You may recall that, during the worst parts of the recession, many (including we at APICS) pointed to a silver lining: Even as the economy was hemorrhaging jobs, productivity was skyrocketing. Perhaps now we are seeing the reverse of that phenomenon, as the Department of Labor reveals that manufacturing productivity dipped by 0.4 percent in the fourth quarter of 2011.

John Herrmann of Herrmann Forecasting is quoted in the Bloomberg piece, "With hours extending, productivity could cool off a bit in manufacturing and that would beget more hiring. That would be a very strong signal for the underlying economy." The clear takeaway is, from a short-term employment standpoint, lower productivity is not necessarily a bad thing. But at the enterprise level, lower productivity means diminishing returns on wages and paying more for relatively less work. It also signifies tighter profit margins, lower efficiency, and a negative impact on the bottom line.

Advancing the workforce

It takes time and capital investment for productivity to catch up to a growing labor force. Sometimes that investment takes the form of machinery and new technology; other times, it means employee development. Consider part of the definition of productivity from the APICS Dictionary: "the actual output of production compared to the actual input of resources." The APICS body of knowledge further delineates between machine productivity and labor productivity. The appropriate question is, if productivity is dipping, which axis needs the boost__machinery or labor?

One does not boost productivity simply by instructing employees to work harder. That may increase output, but at the expense of more person-hours, added strain on bodies and machinery, and perhaps greater maintenance and scrap. At APICS, we believe an important key to augmenting productivity is building and enhancing the workforce through education, certification, and other forms of professional development, including attending conferences and seminars, networking, and mentoring. Enroll in an APICS CPIM or CSCP class and take the exam. Engage with other members in the new APICS Supply Chain Channel. Read through the latest issue of APICS magazine.

At all of our jobs, we experience firsthand the need for greater productivity. Whether it means pressure to meet budget targets, reach output quotas, or simply become leaner and more efficient, maximizing productivity can be a struggle at any workplace. Boosting your own productivity as a supply chain and operations management professional is good for not only your own professional development, but also your organization. If you are ready to take on the challenge, APICS resources are here to help.

Operations management is everywhere. Today, operations management professionals have unprecedented impacts on the global economy. Consider these questions and how today's edition of APICS Operations Management Now relates to you and your career.

Is productivity increasing or decreasing at your organization? What, if any, efforts are being made to increase productivity?

Do you think the positive jobs trend in the United States will continue? What about globally?

What are the three greatest actions you are taking to foster your professional development?

Comments

JIMMY NGO CHU
February 20, 2012, 10:37 PM

As you have indicated that productivity is output versus input or output per unit input, so, when input in labor increases, this does not immediately translate into increase in output specially if both are measured in the same period.

What will be interesting is to measure the learning curves of the new hires and I agree that giving them the right training, coaching and tools will surely make the catching up faster and if the newly hired has talent and experience or much 'value added', increase in productivity should follow in the succeeding periods.